My Home, My Business

I plan to deceive the board and run a business out of my apartment. I expect to have ten to 20 clients visiting me daily."

Unless you intend to use truth serum, chances are your board will never hear those words during an interview with a prospective cooperator. Yet the availability of personal computers and a more flexible work world increase the chances that a tenant may want to run a company out of the home. When does a home business become a co-op's business?

The answer: it depends. Legally, zoning regulations in most areas require a person running such a business to live in the space. The operation should also take up no more than 25 percent of the home, or 500 square feet, and there can be no more than one other employee working on-site.

Beyond that, boards should be concerned about security issues. "It's a question of control," observes attorney Stanley B. Dreyer, a partner at Gallet Dreyer & Berkey. "If a home business impacts building security, it's up to the board of directors and managing agent to keep this sort of activity under control."

"I had a case where an acupuncturist was running an office on the third floor of a co-op," explains attorney Steve Wagner, a partner at Wagner, Davis & Gold. "This doctor was clearly not living in the apartment. There were several treatment rooms and a reception area where herbs were sold, and there was no kitchen. This doctor was basically buzzing in anyone who came to the door and leaving trash bags full of used pins out in the hallway. Other residents on the same floor had children. They weren't playing in the hallway, but it was dangerous."

There are some reasonable requests a board can make of a shareholder during an interview. According to attorney Bruce Cholst, a partner at Rosen & Livingston, a board can guard itself against prospective problems by asking to examine the following documents:
*a lease for current office space
*business tax returns (which should indicate an office address)
* business letterhead

But what about the home business owner who is already a shareholder in the co-op? "When boards come to me and ask me what to do about an intrusive home business, the first thing I tell them is to regulate using house rules," says Cholst.

A co-op board should draw a distinction between the types of occupations that stress resources and security and those that are permissible.

"A draftsman working out of his home, alone, isn't going to require a lot of client or customer involvement," says Dreyer. "A day- care center, or even a woman babysitting three or four neighborhood kids, is conducting a business that will impact the co-op. A day-care center would require a number of city permits."

The board can also establish rules requiring visitors to log in and out and to wait in the lobby (as opposed to hallways), limiting times that clients/patients may visit, indicating disposal methods for certain types of waste, and restricting noise.

If you suspect a shareholder is running a business, but he or she is being cagey about it, you can use your resources. "You may look at, or have a doorman note, the mailing addresses on packages delivered to the building, as long as the addresses are open and notorious — written on the package," says Dreyer. "If a shareholder has a constant flow of people coming through the door, they're probably not just social visitors, and the building staff should notify the board or manager."

When a shareholder is obviously conducting an unacceptable home business, is unwilling to give it up, and is endangering or disturbing other shareholders, a board should consult its lawyer.

Notes Wagner: "I sought an action for declaratory judgment against the acupuncturist. It's more expensive, but you wind up with a permanent injunction instead of going through a housing court proceeding. The court declares exactly what the use of the unit may be. So the court isn't throwing anyone out of his home — and they are reluctant to toss people out."

Oftentimes, these home business issues arise because of sponsor sales. In such cases, boards should not just grin and bear it. Seek counsel, and remember that a court has to see a "material obligation" — a matter that affects the health or safety of other residents or puts strains on the facility.

"Don't sit on your rights," Cholst warns, "or these people could end up getting grandfathered in, no matter what the board thinks is best for the co-op."